The United States Supreme Court's decision in Circuit City v. Adams conclusively established an employer's ability to unilaterally require non-union employees to submit their employment disputes to binding arbitration. The Court's decision resulted in a deluge of articles regarding the legal intricacies and the significance of the opinion itself. This article focuses on practical application of the Court's historic decision. It equips employers with the ability to focus on issues which should be addressed before legal counsel is contacted to draft an arbitration agreement, as well as implementation issues, allowing employers to engage legal counsel more effectively and efficiently.
An arbitration program is similar to many other human resource initiatives: the most effective and efficient policies and programs are tailored to the needs of the organization. The most successful practices also avoid issues which can undermine their usefulness or enforceability. Further, knowing which matters to avoid will help employers focus on the issues which need to be addressed while maintaining realistic expectations. Moreover, a defective or poorly implemented arbitration program can result in an unenforceable agreement which, in turn, permits the employee to sue in court. Developing and implementing an arbitration program requires attention to the following key issues:
I. Who will be covered?
Employers must decide who will be covered by the arbitration agreement in two respects:
a. the employees who will be required to arbitrate their claims. Such agreements may be limited in application to new hires, employees within certain departments, divisions, jobs or certain types of employees such as executives, management, supervisors or line staff.
b. the potential litigation targets. This includes the company, its parents or subsidiaries, management and supervisors.
II. What matters should or should not be covered by the arbitration program?
Employers must determine:
a. the nature of the employee claims to be covered by their arbitration program. Generally, Courts interpret such agreements narrowly and hence, the agreement must include statutory claims arising under various State and Federal laws;
b. who will pay the arbitration costs and the means of payment. Employers should consider eliminating or at least limiting costs to the employee which are associated with the process itself. Requiring employees to equally share in the payment of the...